A group of institutional investors from Australia, Europe and the U.S. filed suit in Delaware Chancery Court Friday against Rupert Murdoch, his son Lachlan Murdoch and others, seeking to block News Corp. from extending the so-called "poison pill" to thwart hostile takeovers.
On Aug. 11, News Corp announced it was renewing the poison pill provision for another two years beginning Nov. 8. Corporations adopt poison pills to defend against hostile takeovers. Typically, a takeover attempt can trigger provisions such as the issuance of new preferred shares that carry severe redemption requirements that have the effect of diluting the value of some shareholder's stakes and increasing the cost of a takeover.
The investors say the Murdochs broke "an express promise" made to shareholders earlier this year when News Corp. was negotiating to reincorporate from Australia to Delaware. According to the complaint, the shareholders agreed to the reincorporation largely because the Murdochs promised that no poison pills would be put into effect for more than 12 months without express shareholder approval.
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